UNCLAIMED BALANCES IN BANKS (Possible Utilisation)

Mr David Marshall asked the Minister for Finance whether he has any information as to the extent, and possible utilisaticn by subrogation, of customers' balances in banks unclaimed for more than seven years.

Dr Goh Keng Swee: The present returns submitted by banks under the Banking Ordinance, 1962, do not indicate the number of dormant customers' accounts or the amount of unclaimed balances on such accounts which have not been operative for seven or more years.

The banking legislation of Singapore and the Federation of Malaya does not specifically designate what disposition should be made of unclaimed deposits in banks. It is generally understood that these balances remain a liability of the bank until they are paid. In practice, the balances are transferred by the banks to an "Unclaimed Balances Account" and would appear together with other balances as liabilities on the bank's balance sheet.

In the United States the Federal Reserve Act and the National Bank Act make no provisions with regard to disposal of unclaimed bank balances. The United States Supreme Court had ruled that a State should not dissolve the contracts of deposit even after 20 years and that national banks could not be required to pay to the State the amounts due.

In Britain the question of unclaimed moneys in banks has been much discussed and exaggerated. A Bill entitled the Dormant Bank Balances and Unclaimed Securities Bill was referred by the British Parliament to a Select Committee which after considering it reported in December 1919 that a much longer period than six years should elapse before a state of dormancy, having legal consequences involving publicity, should be recognised. The majority opinion of the Select Committee was that an account should he deemed to be dormant only after it had not been operative for thirty years or more. The Select Committee also suggested that boxes and parcels entrusted to banks for safe keeping should be subject to legislative action for their disposal only after 70 years had elapsed. As a result of the recommendations of this Select Committee, the British Parliament took no action on the Bill.

In India the practice is to require every banking company to submit within thirty days after the close of each calendar year a return of accounts which had not been operated upon for ten years or more. The return should give particulars of the deposits standing to the credit of each account but there would appear to be no provision for the disposal of any unclaimed assets.

In Australia, however, there is specific legislation under the Banking Act of 1957 to provide for the disposal of "unclaimed monies" which are defined as all principals, interests, dividends, bonuses, profits and sums of money legally payable by a bank in respect of which the time for recovery had expired and includes money to the credit of an account which has not been operative either by deposit or withdrawal for a period of not less than seven years. The unclaimed monies will be paid by a bank to the Commonwealth and will be held in a Trust Fund for six years, after which it would be paid to the Consolidated Revenue Fund. If at any time a legitimate claim is established, such monies shall be paid to the bank and the bank shall thereupon pay the claimant.

I give this account of some instance of international practice in this matter to show that there are wide variations in policy. So far as Singapore is concern ed, the banks are of the view that it is not a matter Of sufficient importance as to justify new legislation. I myself am inclined to leave it well alone, especially as experience and practice in other countries have not produced any unanimity in dealing with the matter.

Mr David Marshall: Mr Speaker, Sir, in the light of the recognised fact, how shall we say it, that the banks have no right to benefit by this unearned profit of unclaimed balances, would the Minister not consider advising the Government to introduce legislation analogous to the Australian legislation whereby the Government could at least utilise the money pending a claim? The use of the word "subrogation" in my original question was subrogation to rights and liabilities. There is no question of extinguishing a customer's right whether it is seven years or 15 years. But in the meanwhile the Government can use this money without interest. Will the Minister consider it? This is a Christmas present almost of fairly considerable sums which the Government could utilise, some of it permanently and some of it temporarily without interest.

Dr Goh Keng Swee: In the first instance, I do not think that the sums of money involved are considerable; and, secondly, in so far as other countries have considered this proposal, the majority view is not to fellow the Australian practice. It could be that such a majority view is based on ether ancient concepts of the right of private property. As I said, I myself do not think that we should, before other countries have followed the Australian example, introduce in this country a new principle which is not accepted and followed in the majority of countries with banking systems similar to ours.